The former CEO of a small\u00a0Kansas bank\u00a0was sentenced to more than 24 years in\u00a0prison\u00a0for looting the bank of $47 million \u2014 which he sent to cryptocurrency wallets controlled by scammers who had duped him in a \u201cpig butchering\u201d scheme that appealed to his greed, federal prosecutors said.<\/p>\n
The massive embezzlement by ex-CEO\u00a0Shan Hanes\u00a0in a series of wire transfers over just eight weeks last year led to the collapse and\u00a0FDIC\u00a0takeover of\u00a0Heartland Tri-State Bank\u00a0in Elkhart, one of only five U.S. banks that\u00a0failed\u00a0in 2023.<\/p>\n
Hanes, 53, also swindled funds from a local church and investment club \u2014 and a daughter\u2019s college savings account \u2014 to transfer money, purportedly to buy cryptocurrency as the scammers insisted they needed more funds to unlock the supposed returns on his investments, according to records from U.S. District Court in Wichita, Kansas.<\/p>\n
But Hanes never realized any profit and lost all of the money he stole as a result of the scam.<\/p>\n
Judge John Broomes on Monday sentenced Hanes to 293 months in prison \u2014 29 months more than what prosecutors requested after he pleaded guilty in May to a single count of embezzlement by a bank officer.<\/p>\n
During the sentencing hearing, \u201cI called his actions \u2018pure evil,\u2019\u201d said Brian Mitchell, who for years was Hanes\u2019 next-door neighbor in Elkhart, a town of 2,000 or so people in southwestern Kansas, north of the Oklahoma panhandle.<\/p>\n
Mitchell, whose farm and movie theater chain businesses banked at Heartland Tri-State, said there were around 30 shareholders in the bank who attended Hanes\u2019 sentencing, more than a year after their stock value was wiped out in the failure.<\/p>\n
\u201cThere were people who lost 70, 80% of their retirement\u201d as a result of Hanes\u2019 actions, Mitchell told CNBC on Wednesday in a phone interview.One local woman is \u201cstruggling to afford a nursing home\u201d for her 93-year-old mother, while another woman \u201ccan\u2019t retire\u201d now because of the crime, Mitchell said.<\/p>\n
Mitchell, who was not a shareholder but who belonged to the investment club victimized by the CEO, said Hanes showed little, if any, remorse for his actions, despite hearing victims tell the judge about the effects of his crime.<\/p>\n
\u201cShan was facing the judge, and he just looked over his left shoulder for a second, and didn\u2019t make eye contact, and said, \u2018Sorry,\u2019\u201d Mitchell recalled, describing the scene in the courtroom. \u201cAnd that was it.\u201d<\/p>\n
But Hanes had a look of \u201cabsolute shock\u201d on his face when Broomes imposed the stiff sentence and ordered the former bank chief taken into custody immediately, Mitchell said.<\/p>\n
Mitchell said that for years he considered Hanes a \u201cgood guy,\u201d who like other people in Elkhart pitched in to help others in the small community when they needed help, and preached at his local church. Hanes also testified several times before Congress about community banking.<\/p>\n
But prosecutors and bank regulators said that Hanes, who has three daughters with his school teacher wife, began stealing after being targeted in a pig-butchering scheme in late 2022.<\/p>\n
That scheme was described in a court filing as \u201ca scammer convincing a victim (a pig) to invest in supposedly legitimate virtual currency investment opportunities and then steals the victim\u2019s money \u2014 butchering the pig.\u201d<\/p>\n
Hanes, who had served on the board of the American Bankers Association, and been chairman of the Kansas Bankers Association, in December 2022 began making transactions to buy cryptocurrency, which \u201cappeared to be precipitated by communication with an unidentified co-conspirator on the electronic messaging app \u2018WhatsApp,\u2019\u201d prosecutors wrote in a court filing.<\/p>\n
\u201cTo date, the true identity of the co-conspirator, or conspirators, remain unknown,\u201d the filing notes.<\/p>\n
Hanes initially used personal funds to buy crypto, but in early 2023\u00a0he stole $40,000 from Elkhart\u00a0Church of Christ and $10,000 from the Santa Fe Investment Club, according to prosecutors and a defense filing.<\/p>\n
He also used $60,000 taken from a daughter\u2019s college fund, and nearly $1 million in stock from the Elkhart Financial Corporation, his lawyer said in a filing.<\/p>\n
In May 2023, he began to make wire transfers from Heartland Tri-State Bank to accounts controlled by scammers, at first with a $5,000 transfer.<\/p>\n
Two weeks later, on May 30, Hanes wired $1.5 million and a day after that, he sent another transfer of the same amount the following day, filings show.<\/p>\n
Three days later he directed two wire transfers totaling $6.7 million to be sent by the bank to the crypto wallet, and a whopping $10 million less than two weeks later, and another $3.3 million days afterward.<\/p>\n
Hanes told bank employees to execute the wire transfers, and \u201cmade many misrepresentations to various people\u201d to get access to the funds so they could be transferred, prosecutors wrote. Heartland Tri-State employees circumvented the bank\u2019s own wire policy and daily limits to approve Hanes\u2019 wire transfers, according to a report by the Office of the Inspector General of the Board of Governors of the Federal Reserve System.<\/p>\n
\u201cWe believe that the CEO\u2019s dominant role in the bank and prominent role in the community contributed to a reluctance on the part of Heartland employees to question or report the alleged fraudulent activities earlier,\u201d that report said.<\/p>\n
Prosecutors wrote that the series of 11 wire transfers from Hanes to the scammer \u201cillustrate a common pattern\u201d in pig-butchering schemes.<\/p>\n
\u201cFirst, there is an initial \u2018investment\u2019 followed by another transaction required to secure or guarantee those funds,\u201d prosecutors wrote. \u201cFurther \u2018investments\u2019 may be made, but always require another need for funds, to guarantee or unfreeze the earlier transfers. This pattern is clearly represented in the defendant\u2019s embezzlement.\u201d<\/p>\n
Mitchell confirmed that to CNBC, saying that he got a call from Hanes at 7:40 a.m. on July 5, 2023.<\/p>\n
\u201cHe said, \u2018Brian, I need your help, and you\u2019re the only guy who can help me,\u2019\u201d Mitchell recounted.<\/p>\n
Mitchell, who had survived prostate cancer two decades ago, said he thought Hanes was calling him to say that he had the same type of cancer.<\/p>\n
But when Mitchell showed up at Heartland Tri-State to meet Hanes, before the bank had officially opened to customers that morning, the CEO told him something much different \u2014 and stranger.<\/p>\n
\u201cThe first thing he says is, \u2018Brian, I need to borrow $12 million for ten days, and I\u2019ll give you $1 million for loaning it to me,\u2019\u201d Mitchell recalled. \u201cI\u2019m sitting there and I said, am I in a bank in Elkhart, Kansas, or in an alley with a loan shark in Chicago.\u201d<\/p>\n
When he asked Hanes what he wanted the money for, Hanes \u201cpulls out his phone and acts like he\u2019s logging in and he shows me this account that has $40 million, $42 million,\u201d Mitchell said. \u201cHe said, \u2018Brian, I\u2019ve got this money and it\u2019s in cryptocurrency, and I need $12 million to help verify the funds.\u2019\u201d<\/p>\n
Hanes then hold him he had been in touch with a banker in Denver named \u201cJim\u201d and \u201canother guy in Oklahoma\u201d and they had invested in crypto held in Coinbase accounts, where they had made a lot of money, Mitchell said.<\/p>\n
\u201cI told him, \u2018You\u2019re in a scam, dude. You\u2019re in a scam,\u2019\u201d Mitchell said. \u201cI stopped him and said, \u2018Is this bank money you\u2019re playing with?\u2019 And he said, \u2018No, Brian.\u2019\u201d<\/p>\n
Hanes kept telling him he needed the $12 million to \u201cactivate\u201d the funds he had already transferred to the crypto account, which he said was in Hong Kong, Mitchell recalled.<\/p>\n
\u201cI said, \u2018Get on a plane, go to Hong Kong, hire an interpreter, and go get a bank check\u2019\u201d for the funds supposedly held there, Mitchell said. \u201cThen I said, \u2018I\u2019m not going to loan you the money.\u2019 I said, \u2018You\u2019re in a scam, walk away.\u2019\u201d<\/p>\n
But later that same day, after Mitchell rebuffed his entreaties, Hanes had bank employees wire $8 million to the scammers\u2019 accounts, prosecutors said in a court filing.<\/p>\n
Two days after that, Hanes had employees wire the scammers another $4.4 million.<\/p>\n
In the meantime, Mitchell, who was unaware of those transfers during that period, said that after meeting with the CEO he was worried that Hanes would get access to customers\u2019 deposits at the bank and transfer the $12 million that he had asked for.<\/p>\n
\u201cWe kept checking our lines of credit,\u201d Mitchell said.<\/p>\n
\u201cThe next week, I was in the bank, and one of the employees caught me, she just looked so stressed,\u201d Mitchell said. The woman told him that Hanes had wired money out of the bank.<\/p>\n
\u201cI said, \u2018Don\u2019t say another word to me\u2026 I\u2019ve got to talk to a board member,\u2019\u201d Mitchell said.<\/p>\n
\u201cAnd I talked to a board member that night, and he went to talk to an attorney that night,\u201d Mitchell recalled.<\/p>\n
Hanes was fired within days.<\/p>\n
About two weeks later, on July 28, 2023, Heartland Tri-State was closed by the Kansas Office of the State Bank Commissioner was taken over by the Federal Deposit Insurance Corp.<\/p>\n
Shareholders were wiped out, but depositors did not lose any money, as Dream First Bank, National Association, of Syracuse, Kansas, assumed all deposits.<\/p>\n
Heartland Tri-State, had nearly $140 million in total assets and $130 million in total deposits as of the prior March.<\/p>\n
Word quickly spread that a scam had led to the bank\u2019s failure.<\/p>\n
But Hanes remained uncharged until last February, when he was charged by federal prosecutors with embezzlement. He was separately charged in Morton County, Kansas, state court by the county attorney in a 28-count complaint related to looting the bank.<\/p>\n
Hanes was under house arrest until his sentencing in federal court this week.<\/p>\n
\u201cI talked to him last month when he was out mowing his yard,\u201d Mitchell said.<\/p>\n
Hanes, who had traveled at one point to Perth, Australia while being scammed to try to recover the funds he transferred, told Mitchell that he believed there had been a way to recover the money up to the point he was arrested.<\/p>\n
\u201cHe said \u2026 \u2018If I just had another two months I could get the money back,\u2019\u201d Mitchell recalled.<\/p>\n
Mitchell said that at Hanes\u2019 sentencing, Judge Broomes asked Hanes several questions about his actions, but, \u201cHe didn\u2019t really have any good answers.\u201d<\/p>\n
Broomes later looked at the victims in the courtroom\u2019s gallery before announcing Hanes\u2019 sentence.<\/p>\n
\u201cHe said \u2026 \u2018I want you to forgive Shan. I know that he\u2019s hurt you, I know this, but I want you to move on, and I want you to find some joy in your life. Let me discipline him,\u2019\u201d Mitchell recalled.<\/p>\n
Broomes also told Hanes that although several people had noted how intelligent the former CEO was, \u201cIf you were that intelligent you would have stopped this,\u201d Mitchell recounted.<\/p>\n
Hanes\u2019 lawyer John Stang, who did not respond to a request for comment, in a sentencing submission wrote, \u201cMr. Hanes made some very bad choices after being caught up in an extremely well-run cryptocurrency scam.\u201d<\/p>\n
\u201cHe was the pig that was butchered,\u201d Stang wrote. \u201cMr. Hanes\u2019s vulnerability to the Pig Butcher scheme caused him to make some very bad decisions, for which he is truly sorry for causing damage to the bank and loss to the Stockholders.\u201d<\/p>\n
Kansas U.S. Attorney Kate Brubacher, in a statement, said, \u201cHanes\u2019 greed knew no bounds. He trespassed his professional obligations, his personal relationships, and federal law.\u201d<\/p>\n
\u201cNot only did Shan Hanes betray Heartland Bank and its investors, but his illegal schemes also jeopardized confidence in financial institutions,\u201d Brubacher said.<\/p>\n<\/p>\n
The former CEO of a small\u00a0Kansas bank\u00a0was sentenced to more than 24 years in\u00a0prison\u00a0for looting the bank of $47 million \u2014 which he sent to cryptocurrency wallets controlled by scammers who had duped him in a \u201cpig butchering\u201d scheme that appealed to his greed, federal prosecutors said. The massive embezzlement by ex-CEO\u00a0Shan Hanes\u00a0in a series […]<\/p>\n","protected":false},"author":0,"featured_media":8383,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-8382","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/8382","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=8382"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/8382\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/8383"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=8382"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=8382"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=8382"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}